How T&T brokered an agreement with BAE Systems AG negotiated for $400 million more for a total of $1.382 billion Coast Guard commander expressed his reservations since 2008

In a David-versus-Goliath-like battle, which was Trinidad and Tobago against the UK firm British Aerospace Engineering (BAE) Systems in legal arbitration, this country emerged compensated.

The legal "victory" means T&T could pay the balance of the $2 billion loan, which it had secured to embark on the project to purchase three offshore patrol vessels (OPVs), which spanned three years and concluded when the People's Partnership Government cancelled the order from the UK firm in September 2010.

There has been the argument that the settlement of $1.382b was simply a refund equivalent to the sum paid by the Brazilian Navy for the cancelled OPVs, which was £133 million ($1.3b).

But long before a settlement was agreed to with BAE, the country's governments—the former PNM (People's National Movement) administration, which placed the original order, and the present PP coalition—were having problems with the British defence company.

The UK's Ministry of Defence, which had provided technical assistance to the project, was also aware of BAE's failure to meet its contractual obligations.

Both BAE and the T&T Government agreed upon the resolution of the dispute to a non-disclosure clause for arbitration documents. BAE Systems was seeking to recover $611.032 million from the State as it had taken a 100 million pound sterling charge on its books and, in turn, T&T had issued a counter-claim of $1,654 million for the boats, which were valued at £155 million ($1.55b).

There was no arbitration judgment as both parties settled the matter shortly after the hearings concluded. What exists are witness statements and documents filed in support of each party's claim.

In copies of documents obtained by the Sunday Express, which formed part of the arbitration hearings between the parties in London from May 8-18, it outlines deadlines which BAE failed to meet with the OPVs, the lack of information and transparency provided to T&T as a customer, as well as ways in which BAE sought to compensate this country for their inability to keep to the terms of the contract signed in April 2007.

Details were contained in the witness statement of Commodore Garnet Best (Retired T&T Coast Guard), who was the director of Defence Transformation and Integration Secretariat (DEFTIS), which was a unit in the Ministry of National Security, and Captain Mark Williams, who managed the OPV project for T&T in the United Kingdom.

Best, who was instrumental in the conceptualisation of the OPV project, noted when RFPs (request for proposals) were first issued by the PNM government, it was very specific in what it wanted: "We wanted an armament capable of firing both 'aim to miss' and 'aim to hit' rounds, for which purpose accuracy was important."

Mere months after the execution of the contract, BAE informed the Joint Programme Board meeting (which handled the OPV matter) of a delay in delivery of two interim vessels.

Since 2008, the PNM government was aware of the late delivery of the interim vessels, as well as the push back of delivery of the OPVs.

"I recall also that in its report on June 17, 2008, the MOD (British Ministry of Defence) was critical of BAES and its lack of openness and transparency, and its failure to share information and details of its build programme, which was inconsistent with the principles of the partnership agreement that I had signed in October 2007. The MOD also noted there were discrepancies in what BAES was stating to be the cause of the delay and also what it was reporting as to the precise extent of the delay," stated Best.

The former CG commander said it was the MOD which advised T&T to "reiterate the importance of the contractual delivery dates" for OPV 1, in time for the Commonwealth Heads of Government Meeting (CHOGM) in Port of Spain in November 2009, "which was to be attended by Her Majesty the Queen and for which meetings we had planned to use OPV 1 for security purposes as BAES was aware".

However, BAE failed to meet their own deadline targets in 2009 for delivery of OPV 1 and OPV 2.

Best said on 16 May, 2009, the Trinidad and Tobago government issued a notice of default in respect of BAE's failure to deliver OPV 1 by the contractual delivery date. However, a month after, BAE insisted it could meet the OPV schedule as previously forecast—OPV 1 on February 24, 2010, OPV 2 on May 15, 2010 and OPV 3 on November 15, 2010.

"During the course of late 2009 and 2010, in consequence of these delays and BAE's consequent default under the contract, giving rise to a right to terminate the contract with the government, BAE proposed re-setting the delivery dates for the three OPVs, in return for providing the Government with a package of compensation," he said.

However, that draft was not signed by the old administration or the new People's Partnership Government.

But the company then experienced another problem with the combat systems.

A major cause of concern was that the guns were not done to specifications and whether they could be effective—it could not successfully hit a moving target unless done manually, which would not be practical on the high seas, and could only fire within a 4 km and not a 6 km radius, which was specified in the contract.

"We considered it vital that OPV 1 be demonstrated to be fully compliant with the build specification before the Government accepted the vessel, all the more so because it was first of class. BAE's reluctance to provide further trials and tests to satisfy its customer was difficult to understand," said Best.

"BAES was asking us to accept the vessel without having demonstrated any effective capability of the main armament in the mode in which it was primarily intended to be operated. We had no data on the performance of the armament and no visibility on how it would perform after the problems had been resolved.... In an e-mail to me of May 18, 2010, commenting on the letter, Captain Huggins (also of the T&T Coast Guard) observed: "It is clear that this vessel would not be able to defend itself if attacked when up against current technology. I would not like to sound or appear facetious, but in terms of a naval vessel, our attempts of an upgrade has more or less resulted in a downgrade...we are back to using mechanical sights."

Following this, a report was done by the UK's Ministry of Defence on June 18, which observed that T&T OPV 1 had been offered up for acceptance "with a degraded combat system and a number of relatively minor outstanding issues/defects throughout the ship".

In its assessment report, the MOD surmised: "In an ideal world, the vessel should be presented for acceptance, fully completed and without any defects. However, in our experience, that is never achieved, and hence there is always a judgment to be made about whether the ship is in sufficiently complete state to 'accept' and take forward."

The MOD had urged T&T to consider accepting the degraded boat with a hope of rectification (possibly one year).

For his part, Best agreed with the MOD to accept the OPVs subject to the contractual commitments being put in place pre-acceptance.

"A large amount of time and money had been invested in the project, not to mention manpower (including a large number of staff and crew) over an extended period of time," he observed.

Best wasn't the only one who shared this view.

On August 14, 2010, former minister of National Security John Sandy had provided a note to Cabinet in which, having reviewed the regional maritime security requirements, had recommended that government accept the OPVs on the basis of an acceptance agreement put in place that included a rectification plan to correct all outstanding faults, compensation for the diminished capability of the combat system and a re-negotiated compensation package for delayed delivery.

That was disclosed in the witness statement of Attorney General Anand Ramlogan. In his witness statement to the arbitration, Ramlogan said it was a collective Cabinet decision to terminate the contract on September 16, 2010.

"One of the factors that weighed in keeping the OPV contract going was the vast amount of time, sunk cost and opportunity cost, in terms of man time, that we had invested over a very substantial period of time, and the fact that we needed to upgrade our maritime capability. However, in the end, we decided to cancel for the reason stated in our letter the following day: namely, the very substantial delay in BAES in delivering the OPVs which did not inspire any confidence as to the future. Added to this history of delay was the future ongoing delays in delivering the OPVs, the continuing uncertainty over future timescales for rectification, the uncertain prognosis upon rectification and the risks that Government would be taking in accepting the OPVs in these circumstances," stated Ramlogan.